If prices are "sticky" in the short run, then
A)the economy will respond to demand shocks primarily through changes in output and employment.
B)the economy will respond to demand shocks primarily through changes in prices and inflation.
C)prices will adjust to equalize the quantities demanded and supplied of goods and services.
D)unemployment will not change in response to a demand shock.

Question

Quizplus · Accepted Answer

In the short run, if prices are sticky, they do not adjust quickly to changes in demand. As a result, the economy responds to demand shocks through changes in output and employment rather than prices.

If Prices Are "Sticky" in the Short Run, Then